SETTLEMENT IN RUPEES -
ECONOMY
News: Payment mechanism for traders
importing pulses from Myanmar simplified: Govt
What's in the news?
●
India has streamlined the payment process for
traders involved in importing pulses from Myanmar by mandating the utilization
of the Rupee/Kyat direct payment system via the Special Rupee Vostro Account
(SRVA) managed through the Punjab National Bank.
Settlement in Rupees for
Value Arrangement (SRVA):
●
SRVA facilitates the settlement of international
trade through Indian Rupees (INR), offering an alternative to the prevailing system that relies on freely
convertible currencies.
Aim:
●
To reduce
dependence on hard (freely convertible) currencies, providing a
complementary mechanism for trade settlements.
Functioning of SRVA:
1. Approval Process:
●
SRVA necessitates prior approval from the Reserve Bank of India (RBI) before its
establishment, distinguishing it from Rupee Vostro accounts.
2. Components of the
Framework:
●
Invoicing: All exports and imports must be invoiced and
denominated in INR.
●
Exchange Rate: Currency exchange rates between trading partner
countries are determined by the market.
●
Settlement: Final settlement occurs in Indian National Rupee
(INR).
3. Implementation:
●
Domestic importers make payments in INR into the
SRVA of the correspondent bank for goods or services obtained from overseas
suppliers.
●
Similarly, domestic exporters receive export
proceeds in INR from the designated account of the correspondent bank of the
partner country.
Eligibility Criteria for
Banks:
●
Banks from partner countries must approach an
authorized domestic dealer bank to initiate SRVA.
●
The domestic bank seeks approval from the apex banking regulator, providing comprehensive
details of the arrangement.
●
Domestic banks ensure that the correspondent bank is not from a country
listed in the Financial Action Task Force's (FATF) Public Statement on
High-Risk and Non-Cooperative jurisdictions.
●
Financial parameters concerning the corresponding
bank are submitted for evaluation.
●
Authorized banks have the flexibility to open
multiple SRV accounts for various banks from the same partner country.
●
Balances in the account can be repatriated in
freely convertible currency or the currency of the beneficiary partner country,
depending on the nature of the transaction.
Regulatory Compliance:
● All cross-border transactions are reported in accordance with the guidelines stipulated under the Foreign Exchange Management Act (FEMA), 1999.